Ethiopia has implemented a market-led foreign exchange rate system starting today, July 29, 2024.
Following this decision, banks have begun applying the new exchange rate. The National Bank of Ethiopia announced that the foreign exchange management system has shifted to a market-based approach, where rates are determined by banks and their customers.
The Commercial Bank of Ethiopia reported that one US dollar is being bought at 74.7364 Birr and sold at 76.2311 Birr, according to the latest foreign exchange rates.
This shift has led to an average increase of 18 Birr per US dollar.
Additionally, the exchange rate for one pound sterling is 91.8787 Birr for buying and 93.7263 Birr for selling. One Euro is bought at 81.0367 Birr and sold at 82.6574 Birr, according to the Commercial Bank of Ethiopia’s detailed price list.
In its statement this morning, the National Bank provided details of the new foreign exchange rates based on market demand and supply, effective immediately.
The bank emphasized that foreign exchange rates should be negotiated between banks and customers.
The transfer of foreign currency to the national bank will cease, and restrictions on foreign currency supply for 38 imported goods will be lifted. Exporters will retain 50 percent of their foreign currency earnings.
Furthermore, the practice of allocating foreign currency for various goods will be reformed to ensure fairness. Private foreign exchange offices will be established, and restrictions on importing goods with franco valuta currency will be revised.
Individuals in Ethiopia receiving wages in hawala or foreign currency will be allowed to open foreign currency accounts. The National Bank also mentioned that the interest rate on foreign loans paid by banks has been lifted.
Establishing a daily market-based foreign exchange rate was a condition for the release of loans from the World Bank and the IMF. Ethiopia has been promised a loan of $10 billion upon meeting these conditions.
Following new reforms by the National Bank, Ethiopia has lifted its ban on importing fuel-powered vehicles.
Since last March, the Ethiopian government had imposed a ban on the importation of private service vehicles that rely on fuel.
Companies importing vehicles into Ethiopia were notified last week that they could no longer import fuel-run vehicles.
This directive applied to vehicles sourced from the Middle East, Europe, and South Africa, causing significant losses and challenges for importers.
The Ethiopian Investment Commission voiced its opposition to the ban, arguing that the policy would negatively affect investors and foreign investments.
In a letter to the Ministry of Transport, the commission expressed concerns about the appropriateness of the ban, especially given the lack of a clear legal framework.
The commission emphasized that the decision to prohibit fuel-powered vehicle imports had significantly impacted various sectors, including agriculture, agricultural product processing, flower farming, tourism, manufacturing, and construction.
